Battery-grade lithium carbonate has fallen more than 10 percent compared to mid-November when prices reached as high as RMB 590,000 per ton.

A month ago, CnEVPost noted that lithium prices seemed to be losing momentum to rise even higher. Now, what has happened seems to bear this out.

The price of industrial-grade lithium carbonate in China fell by RMB 5,000 ($718) per ton today to RMB 497,500 per ton, the first time it has fallen below RMB 500,000 since late September, according to My Steel.

Battery-grade lithium carbonate prices also fell 5,000 yuan per ton to 527,500 yuan per ton today, according to My Steel.

Lithium carbonate prices have been falling by several thousand yuan per day since December 12, My Steel data show.

Compared to mid-November, when the price was as high as RMB 590,000 per ton, battery-grade lithium carbonate has fallen by more than 10 percent.

The continued decline in lithium carbonate prices is due in part to the fact that China's new energy vehicle (NEV) industry is facing a bleaker outlook than it did in the first half of the year.

During the traditional peak sales season of September-November, the Chinese auto industry did not achieve the same strong sales as in the past.

Retail sales of passenger vehicles in China fell 9.2 percent in November to 1.65 million units, down 10 percent from October, the first time since 2008 that the September-November peak season saw a sequential decline, the China Passenger Car Association (CPCA) said in an article today.

Wholesale sales of new energy passenger vehicles in China reached 728,000 units in November, up 70.2 percent year-on-year and up 7.7 percent from October.

Although NEVs are a bright spot in the auto market, the impending expiration of subsidies has not contributed to the dramatic year-end sales growth that many had expected.

In a November 28 research note, Morgan Stanley argued that a material correction in lithium prices is likely in 2023, as headwinds from demand growth allow supply to catch up.

Morgan Stanley sees Chinese lithium carbonate prices at $67,500 per ton in the first half of 2023, falling to $47,500 per ton in the second half of 2023, the latter implying a 35 percent decline from current spot.

In addition, sodium-ion batteries, which have been talked about intensively recently, may have helped drive the price of lithium carbonate downward.

A CATL executive said in late November that sodium-ion batteries can generally meet the demand of passenger car models with a range of up to 400 kilometers.

Hina Battery announced in early December that its sodium-ion line, the world's first GWh-class sodium-ion battery line, saw its first product rollout.

Svolt Energy said last week that it completed the development of its first-generation sodium-ion battery and that a second-generation sodium-ion product is in development, with design expected to be completed in the first quarter of 2023.

The high lithium price is a key factor in the high hopes for sodium-ion batteries. If sodium-ion batteries begin to be adopted on a large scale, the demand for lithium in the NEV, as well as energy storage industries, is expected to decrease.

The fall in the price of lithium carbonate is good news for electric vehicle companies, although the bleak demand represents the opposite.

If lithium carbonate prices stay this high, it will have a relatively big impact on Nio's gross margin, William Li, the company's founder, chairman and CEO, said in a conference call with analysts after announcing its third-quarter earnings on November 10.

Every RMB 100,000 increase in lithium carbonate prices will have a 2 percentage point impact on Nio's gross margin, Li said.

Nio expects lithium carbonate prices to fall back to RMB 300,000 to 400,000 per ton next year, Li said at the time.

Lithium carbonate prices began to loosen noticeably in late November, with the Securities Times quoting a battery cathode material maker in southwest China as saying in a November 30 report that they previously needed to figure out how to buy lithium carbonate, while recently a lot of people have started selling them the product.